Remembering the Moment Our CEOs Dug In

Forty years ago, U.S. corporate honchos saw their power ebbing away. So they did what corporate honchos always do. They asked for a memo.

A landmark historical anniversary passed by almost totally unnoticed last week. No front-page retrospective in a major daily newspaper. No ceremony in the White House Rose Garden. Not even a new postage stamp.

A postage stamp, to be sure, might have been a bit of a stretch. You can’t, after all, put a memo on a postage stamp. Not even a memo that helped change, 40 years ago this month, the course of modern U.S. history.

The writer of this memorable memo, Richmond attorney Lewis Powell, would later go on to national prominence as a U.S. Supreme Court justice. But Lewis Powell, back in August 1971, had no national general public presence.

Powell did have widespread respect within elite corporate circles. A former American Bar Association president, he served on top corporate boards — and had friends in pivotal places, like Eugene Sydnor, a mover and shaker at the U.S. Chamber of Commerce.

Powell and Sydnor, notes corporate watchdog Charlie Cray, shared a sense of impending doom. The American “free enterprise system,” they feared, faced an existential crisis. The enemies of that system would surely triumph — unless business mobilized, as never before, to meet the threat.

The Chamber’s Sydnor asked Powell for a memo that outlined what the Chamber could do to jumpstart a crusade to save free enterprise. Powell’s confidential August 23, 1971 response did just that.

Powell’s memo, reread today, can come across as wildly overheated and even, at times, laugh-out-loud paranoid.

Business confronts, Powell contends in the memo, critics “seeking insidiously” to “sabotage” free enterprise. “Extremists on the left,” he declares, have become “far more numerous, better financed, and increasingly are more welcomed and encouraged by other elements of society, than ever before in our history.”

With “extremists” and “social reformers” working ever more closely in concert, Powell’s memo laments, “individual freedom” itself may stand at risk.

The Powell memo gave inspiration to corporate leaders who would later become familiar names and powerful right-wing forces.

In truth, “free enterprise” in America had faced significantly more threatening — and better organized — challenges before World War I and then again during the Great Depression. In 1971, those Powell labeled “extremists” had no significant political parties, as they had in earlier eras. And the social reformers of 1971, unlike their predecessors, rarely questioned any “free enterprise” basics.

But corporate leaders, Powell correctly understood, did face a hostile political environment in 1971. Progressives were making headway against tax breaks that benefit “only the rich, the owners of big companies,” as one Washington Post columnist put it. “Populist” tracts in mainstream magazines like New York were arguing that “the root need in our country is ‘to redistribute wealth.’”

“This setting of the ‘rich’ against the ‘poor,’ of business against the people,” Powell’s memo seethes, “is the cheapest and most dangerous kind of politics.”

Corporate America, Powell goes on to exhort, must respond with more than “appeasement, ineptitude, and ignoring the problem.” Business leaders must show more “stomach for hard-nose contest with their critics.” CEOs need to consider counterattacking “a primary responsibility of corporate management.”

Yet individual corporate leaders, Powell would acknowledge, can only do so much. An individual corporation, he understood, might be reluctant “to get too far out in front and to make itself too visible a target.” The answer?

“Strength lies in organization,” Powell’s would explain, “in careful long-range planning and implementation, in consistency of action over an indefinite period of years, in the scale of financing available only through joint effort, and in the political power available only through united action and national organizations.”

The rest of Powell’s memo would detail the sorts of steps Corporate America could take — on campuses, with the media, in politics — to sweep away what Powell considered “inequitable” taxes on men of means and tame regulatory agencies “with large authority over the business system they do not believe in.”

The memo would remain confidential until syndicated national columnist Jack Anderson did an exposé in 1973. That publicity only served to whet corporate interest in Powell’s exhortations. By year’s end, a Chamber of Commerce task force — with executives from corporate giants ranging from G.E. to General Motors — had translated the Powell memo into action plan specifics.

Powell’s 1971 musings, historian Kim Phillips-Fein reflects, “crystallized a set of concerns shared by business conservatives in the early 1970s” — and gave “inspiration” to corporate leaders who would later become familiar names and powerful forces, men like arch Colorado right-winger Joseph Coors.

Together, these newly energized corporate leaders would unleash upon America what political scientists Jacob Hacker and Paul Pierson have called “a domestic version of Shock and Awe.”

The number of corporate public affairs offices in Washington, D.C. would quintuple between 1968 and 1978, from 100 to over 500. In 1971, Hacker and Pierson relate, only 175 U.S. corporations had registered lobbyists in Washington. The 1982 total: almost 2,500.

Corporate leaders also joined together in new national organizations, most notably with the 1972 founding of the Business Roundtable, and bankrolled a series of new militantly “free market” think tanks and action centers: the Heritage Foundation and American Legislative Exchange Council in 1973, the Cato Institute in 1977, the Manhattan Institute in 1978, among many others.

Between the late 1970s and late 1980s, add analysts Hacker and Pierson, corporate PACs increased their outlays for congressional races “nearly fivefold.” The U.S. Chamber of Commerce, for its part, would double its membership between 1974 and 1980 and triple its budget.

The end result of this all this political activity? Four decades of corporate pressure have transformed America. Tax rates on corporations and the wealthy have nosedived. Lawmakers have “deregulated” corporations in one sector after another. Unions, across wide swatches of the private sector, have disappeared.

The United States has become, with all these changes, a far more unequal place. In 1971, the year Powell penned his influential memo, America’s most affluent 0.1 percent reported average incomes — in 2008 dollars — of $1,263,485, and America’s bottom 90 percent averaged, again in 2008 dollars, $31,324.

By 2008, America’s top tenth of 1 percent was averaging over four times as much, $5,648,768, and the average income of America’s bottom 90 percent had actually dropped, to $31,244.

The irony here? These numbers would likely trouble Lewis Powell, who died in 1998. Powell saw business as a champion for prosperity for all. He considered unions and collective bargaining “essential” to the freedom Americans enjoy.

Today’s U.S. Chamber of Commerce, by contrast, acts as the lobbying ringleader against any and all legislation that seeks to help workers organize and bargain.

Who knows? Lewis Powell might have come to feel, if he had lived a little longer, that his memo really needed a rewrite.

Sam Pizzigati, the co-editor of Inequality.Org, also edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up here to receive Too Much in your email inbox.